Bad 2011 tobacco deal leads to 2013 stadium deal

The Dayton administration released its heretofore secret plan to fix its botched Vikings stadium funding scheme today. The only surprise is that it didn’t meet Dayton’s description last week that his secret plan would be “something that you’d never even imagine.”

It turned out to include a plan to take a fiscal hammer to smokers. Again.

The plan was unveiled at a Capitol hearing today and includes $24.5 million in one-time revenues from a tax on the current cigarette inventory, MPR’s Tim Nelson reports.

DFLers had already targeted smokers by considering tax bills with cigarette tax increases. A House version was to increase the tax by $1.60 a pack, although Senate Majority Leader Tom Bakk says the final tax could match the $2.52 per pack rate charged in Wisconsin. That’s $1.29 more than Minnesota assesses now, the Associated Press says.

It’s understandable that Dayton would turn to the cigarette tax. Smokers, many of whom are poor, aren’t much of a lobbying threat, and it’s an easy sell under the excuse that it will force more people to quit. It’s a health issue, not a revenue issue.

But it’s surprising how quickly Gov. Dayton caught tobacco tax religion.

“You raise the price of a pack of cigarettes $1.50,” Dayton said in a 2010 gubernatorial debate, “that’s money out of the pockets of working people and poorer people, and that means kids don’t have as much to eat or don’t have the same quality of food. Those are addictions, and I think you treat addictions as addictions and you don’t penalize the people who are dealing with them economically.”

Enter the “health” argument. In March he told MPR that it’s about health not revenue.

“I believe we want to make taxes fairer not more regressive but it serves other purposes,” Dayton said.

Now, it’s serving another purpose — paying for a new football stadium, pretty much the scenario he decried in 2010.

In many ways, the politicians at the Capitol are trying to recover from several bad decisions of the last two sessions. One, of course, was a stadium funding scheme that many analysts said wouldn’t work. But the more serious one is giving away the 1998 tobacco trial windfall.

In 2011, the Legislature decided to spend $1.2 billion over the next 20 years by selling off the windfall with “tobacco bonds.” In exchange, the state got about $750 million to close an immediate budget shortfall. $117 million of that was set aside to pay for the cost of doing it. Do the math on all that.

It was a bad deal that provided an immediate political gain for legislators — making the the budget deficit disappear without raising taxes prior to an election, an election the ruling majority went on to lose.

The situation also shows a deeper problem that’s infected Minnesota for years: the lack of a sustainable vision, especially where anti-tobacco efforts are concerned. Having won the tobacco settlement, the state started an aggressive program to curb smoking, then eliminated it in 2003. Then it increased the cigarette tax to balance the budget and cut smoking, then it sold the tobacco settlement, then it turned to smokers for more money.

  • Bob Moffitt

    The health argument for raising the price of cigarettes is valid and backed by solid evidence.

    We agree that selling off the tobacco settlement was a terrible way to fix a short-term budget problem.

    “Politicians generally don’t like smokers.”

    Giving people cheap cigarettes isn’t really a great show of friendship, Bob.

  • Bob Collins

    What’s your plan for loving the sinner, Bob? :*)

  • MikeB

    A tax of 24.5m on current inventory to help pay for the stadium.

    Only 1 billion to go

  • Josh

    The state should have paid for their portion with a Zygi Wilf tax.

  • Bob Collins

    // A tax of 24.5m on current inventory to help pay for the stadium.

    there’s a corporate tax increase. See Nelson’s blog.

  • Snyder

    I realize that smoking is an addiction and apologize in advance for how judgmental this sounds, but if you’re short on money for feeding your kids because you spent it on smokes, I think you’ve got bigger problems than what the rate of the cigarette tax happens to be.

    That said, I do think using a cigarette tax increase to pay for a stadium is a lousy idea. That increased revenue should be dedicated to the health and human services share of the state budget that I believe is still facing reductions.

  • Tyler

    I would imagine, after going through a cost-benefit analysis, that not smoking is cheaper than smoking – nicotine patches or drugs or whatever, vs. a lifetime supply of cigarettes.

  • Kathleen

    I DO NOT want to pay any portion of an oversize playpen for Ziggy and company.

    I do smoke. Raising the taxes on cigarettes is simply going to cut down or out my (already small) disposable income for other things, like books at Uncle Hugo’s, MPR membership, the occasional drink at Psycho Suzie’s, yarn and classes at the Weaver’s Guild.

    I have called my representative, and made my views clear.

  • Ididinhale

    So on top of balancing the budget on the backs of smokers we also get to pay for the new stadium too? How nice of our lawmakers to consider me and all other smokers their personal piggy bank’s. Honestly what is next for smokers to pay for? What about alcohol taxes? Oh wait I am sure our governing body drinks so why should they help pay for a mess they created.

    Maybe next time we can fill their places with responsible people instead of the short sighted ones we have now. I may be a minority of the voting public but I still vote and I am willing to bet that non smokers can see the hypocrisy of this plan by Gov Dayton.

    /why yes I am bitter does it show?

  • jon

    hhhmmm…. if we tax cigarettes so we can pay for health costs incurred by the state because people smoke cigarettes, maybe we could tax a stadium in order to pay for a stadium…

    Of course the vikings and the NFL would never go for that… how about a tax on entering downtown during a game? We can put it on event parking, and on the buses and light rail? Something like $20 a person should do it (8 games a year stadium is there for 30 years, 65,000 seats in the new stadium…)

  • Christin

    I am a smoker who is forever already ashamed and feeling guilty of my habit so I do not have the guts to say that I shouldn’t pay more taxes. I think I should have to pay more for healthcare due to my habit, becuase addiction, albeit a disease, is also a selfish monster and I take responsibility for my actions. That said, I think that it is total crap that I am paying a regressive sales tax for a sports team that I could care less about on top of paying more taxes for balancing the budget. I understand the social and economic costs of smoking, I know that I need to quit (trust me, I have tried and managed to last over a year), and I plan to quit again this fall. If this were general fund or special for any number of other initiatives, I would be less apt to complain. I am sick of the wealthy maintaining thier power on the backs of regular folks. Maybe when I quit smoking I will use the savings to go to my first pro-football game ever, but I doubt it.

  • Andy

    The only thing that should be taxed to pay for another multi-million (or is it multi-billion?) dollar over-sized sand box is the income of those who get paid gobs and gobs of money to play in it and the “wealthier-than-thou” developer who owns the team and refuses to pay for his own box full of toys.

    Yet another sports stadium boondoggle to add to the burning cesspool in which they belong….

  • Jim

    At some point, even the masses (not just conservatives) are going to wonder: Just how much money does the government need? And, to spend it on billionaires playthings!

  • Kassie

    jon- I like your idea. Except instead of putting the extra tax on people entering downtown, let’s just put it on ticket sales. Too many people enter downtown for things like work, going to the library, to get to their house, etc. who never were interested in building that stadium and will never set foot in it.

    As for smokers, well, at some point the insanity needs to end with the taxes. If the point is to get them (me) to quit, then how is it a good tax base? As they quit, you lose those taxes and then need to raise them further. We apparently didn’t have enough gambling addicts in the state to support the stadium, so now they are going after another type of addict.

    If we are adding taxes to cigarettes that we aren’t adding to other items, then the only thing it should go to is smoking cessation and education.

  • Bob Collins

    // then the only thing it should go to is smoking cessation and education.

    That’s the fundamental shift that’s gone relatively unnoticed — that the bulk of the state’s efforts aren’t abut education, it’s about punishing a behavior.

    And that’s certainly their right but I do wonder if — just as there is a price point for not buying cigarettes — there’s a point at which the tactic of attempting to change a behavior becomes too overbearing for what is still a legal product.

    The continuing claim that this is all necessary because of the state burden of health care for individuals who smoke is no doubt accurate. However, it’s also worth noting that the whole reason for the tobacco trial in the first place was to recover those costs, which they did. And then sold them for pennies on the dollar.

    There’s really only one word for that type of approach.

  • James

    A tax isn’t going to make me quit smoking. This is like raising a tax on milk or gas.. these are necessities. And there is little representation for us consumers.

    Everyone needs to look over all of the proposed tax increase votes this session, as well as the newly proposed expenditures, and see if this wouldn’t make you mad. Clothes tax? Cigarette tax? Alcohol tax? Yet no Sunday liquor sales to offset? Finally.. lets give illegal immigrants tuition at In-State student rates? Minnesota’s legislative body has disgusted me. I hope people are paying attention.

  • brian

    It isn’t really talked about much, but the cost benefit to the state of reduced smoking isn’t as clear as it seems. People getting old is expensive. There was a Planet Money about it a few years ago.

  • Robert Moffitt

    “What’s your plan for loving the sinner, Bob?”

    Well, we do offer tobacco cessation programs for both adults and teens, and we run a free Lung Helpline service to help folks who want to quit.

    We also help people after the damage has been done. People with chronic obstructive pulmonary disease (COPD) and lung cancer. Unfortunately, at that point, there a real limits on what we can do to help.

    We understand that higher prices may not result in adult smokers like Kassie and Kathleen, but we do know that younger smokers will quit — or just not start.

    Bob is right to point out that the state has made some bad decisions on tobacco in the past. We underfund education and prevention efforts, and give away the settlement cash for pennies on the dollar.

  • bsimon

    If there’s a cost associated with a behavior it is fair to try to recover the cost from the source of the behavior. How that translates to getting the smokers to pay for a stadium escapes me. Gov Dayton’s original sin was in publicly funding the stadium. Now he’s compounding that error.